A store offers two payment plans. Under the installment plan, you pay
25 percent down and 25 percent of the purchase price in each of the
next 3 years. If you pay the entire bill immediately, you can take a
10 percent discount from the purchase price. Which is a better deal if
you can borrow or lend funds at a 5 percent interest rate?

HOmework, and simple besides.

If it so simple why not answer the question?

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As you have seen on your other question, you may get an answer, but
the above is the principle on the subject.
Myoarin

This is not a homework question.

Paying now with the 10% discount is the better deal, assuming that
whichever way you did it, you invested your remaining cash and let it
sit in compounding account for the entire term.

You have to make sure you comparing apples and apples, though. Let's
say you walk into the store and are looking to buy the item in
question for $100, and you have the full amount of cash in hand. The
store offers to let you have the item today for either a) $25 now, and
$25 a year from now, two years from now, and three years from now. Or
b) $90 now. In either case you'll have cash left over to invest. In
case a) you'll have $75 to invest at 5% for a year (resulting in &75 x
1.05 = $78.75) at which time you'll pay $25 of that to the store,
leaving you with $53.75 to invest for the second year.  At 5%, that
money would become $53.75 x 1.05 = $56.44 two years from today.
Subtract another $25 for the future payment, and you are left with
$31.44 to invest for the last year. At 5% that money becomes $31.44 x
1.05 = $33.01 by the time you have to make the final $25 installment.
So in three years you'd be left with about $8.01 in cash.

In scenario b) you pay for the full cost of the time less a 10%
discount (pay $90) today, leaving you with $10 to invest. In one year,
you'd have $10.50 in the account, which you leave there to compound at
5% for a couple more years. In year two you have $10.50 x 1.05 =
$11.03 and at year three you'd have $11.03 x 1.05 = $11.58 in cash,
compared to the $8.01 you'd have under the installment plan.

Another way to look at it is if you had exactly the right amount of
money to purchase the item with the 10% discount, with nothing left
over to invest if you didn't do the installments. So you show up with
$90 in hand, and pay it all today, and have zero left over now, and
zero in three years. Or you, pay $25 and invest the $65 left over, as
above. In year 3 you'd have less than the $25 required to complete the
installments, and would then have to borrow money at 5%. Since you'd
be in debt (as opposed to being all-square/zero-zero) in year three,
paying the full amount less the discount is still the better option..